Non-state actors and outcomes funds

Part three of our Lessons from Colombia series. 

By Marta Garcia and Maria Alejandro Urrea

This blog is part of a series on the experience of Global Affairs Canada (GAC) in structuring a CAD $30–50 million Outcomes Fund for Education Results (OFFER) in Colombia. Upon launch, the fund will aim to ensure students have equitable access to education and opportunities for retention and achievement. We’re pleased to share the lessons learned around the role of the governments, donors, and non-state actors to support the development of Outcomes Funds and how these vehicles could contribute to ecosystem building.

The Outcomes Fund for Education Results (OFFER) initiative in Colombia is spearheaded by an Alliance for Rural Education – a group of actors that includes Global Affairs Canada (GAC), four local foundations with extensive experience in the education sector, and the Ministry of Education. This group, four of which are non-state actors and one an international donor, has led the design of the fund, making joint decisions about its strategic objectives and the way it will operate over the next few years. The members of the alliance will be responsible for co-financing the fund’s operations during its initial phases, providing resources to develop and launch a series of payment-by-results projects and leading the execution of key systemic change strategies. Once the fund is consolidated, it will start seeking additional financial resources from other potential funders, in particular to pay for outcomes.

The involvement of this group of public and private partners was a careful and deliberate choice on GAC’s part to bolster the OFFER’s chances of achieving long-term sustainability. From the very beginning, it was apparent that the success of the initiative would hinge on it being ultimately owned by a Colombian institution, whether public or private. Given the early challenges faced by the Colombian public sector in adopting payment-by-results mechanisms, mobilising the private sector became a necessity and a key objective for GAC. The alliance that will lead the OFFER over the next five to eight years was eventually formed with a tight group of foundations who share a vision of the country’s education priorities and a strong interest in pursuing innovative approaches to achieve better outcomes in this area.

Working with a small group of prominent foundations offered several advantages to GAC with regards to the launch and implementation of the Outcomes Fund:

Strategic alignment

The similarity of their mandates, close working relationships and shared awareness of the priorities in the issue area helped to achieve strategic alignment, which in turn facilitated fast decision-making during design.

Flexible funding, adaptive design

The nature of their funding – more flexible and less risk-averse than that of government – meant that the foundations could allocate their budget flexibly to respond to the diverse needs of the Outcomes Fund over time, which would help surmount otherwise intractable problems. Thanks to the OFFER’s operational and governance structure, its resources can, and will, be used to pay for outcomes, to provide working capital as if the partners were social investors (i.e. impact-first investors prioritising potential social outcomes over financial returns), to fund broader system change strategies such as the creation of evidence, and to underwrite critical activities to accelerate progress when alternatives cannot be found.

Leveraging stability

Finally, these organisations are highly stable compared to public sector and international cooperation entities, whose directorial teams change regularly — thereby creating uncertainty for the continuity of programs and funding. Moreover, they have decades of experience investing in education, which has allowed them to gain deep knowledge of the educational sector. The stability of the foundations’ leadership teams will ensure that both insight and impetus remain within the partnership in the long run.

The role of non-state actors in promoting the implementation of Outcomes Funds is also visible in other Latin American contexts. In Chile, a group of prominent philanthropic foundations has joined forces to build Public Good (Bien Público, as per the coalition’s name in Spanish) with the aim of leveraging payment-by-results mechanisms to ensure that all vulnerable children and adolescents in the country have access to quality education. The alliance is currently designing an Outcomes Fund to procure payment-by-results projects focused on school retention. Over time, it is expected that this fund will generate valuable lessons about what works to achieve better educational outcomes and how an outcomes focus in project design and procurement can contribute to important education policy goals. Based on this evidence, the Outcomes Fund and its partners hope to advocate for the public sector to increase its use of payment-by-results contracts to procure and implement social programs. 

Non-state actors have a fundamental role to play in facilitating the launch and implementation of Outcomes Funds, especially in contexts where governments encounter restrictions that limit their initial engagement. The sponsorship of a closed and focused group of trusted non-state actors with shared interests and strong alignment around strategic objectives can be catalytic to these initiatives. In essence, non-state actors can get a project off the ground and support its development until it generates sufficient evidence and learnings to earn the attention and engagement of the public sector.